Sao Paulo Metro Line 4

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In November 2006, the State of Sao Paulo and the consortium Concessionaria da Linha 4 do Metro de Sao Paulo SA (ViaQuatro) signed a contract to build, own and operate Line IV (Linha IV) of the Sao Paulo Metro for a period of 30 years. The contract was the first PPP signed in Brazil, on the basis of Brazil’s PPP law of 2004. The State of Sao Paulo was to design, build and finance, the new tunnel, provide the fixed rail as well as various stations, which represented an investment of US$ 922 million. ViaQuatro, the private operator was to design, build, finance and operate the trains and technical equipment. Line IV was expected add approximately 21% to the capacity of the Sao Paulo metro system. The line was to be the first in Latin America to have glass dividers separating the platform from the tracks and the first in Brazil to make cell phone use and Wi-Fi connection possible. The cars were to be equipped with driverless technology via a computerized system. ViaQuatro was comprised of the following sponsors: CCR (Brazil, 58%), Montgomery Participaoes (Brazil, 30%), Mitsui (10%), and RATP and Benito Roggio (1% each). The contract was awarded to Metroquatro in August 2006 in an international competitive tender conducted by the State of Sao Paulo. The lowest government subsidy in the form of availability payments was the bidding criteria. Metroquatro's 75 million real (US$34.6mn) bid beat competing consortium Integravias, led by Ralstom. ViaQuatro was to recover its costs through a combination of user fees and availability payments. Additionally, a minimum revenue guarantee was given to the concessionaire to protect against low usage, as well as a revenue sharing arrangement with the State of Sao Paulo if usage went above projected levels. The total project cost was estimated at US $515 million and reached financial closure in October 2008. The debt was arranged by the Inter-American Development Bank (IADB) and a club of seven banks and was split into two tranches, a $69.2 million, 15-year A loan from the IDB, and a $240 million, 12-year B loan from Banco Santander, SMBC, KfW, Banco Espirito Santo, BBVA as lead arrangers taking $37 million each, and Societe Generale and WestLB as co-lead arrangers, each taking between $35 million and $30 million. The A loan was reduced from around $90 million and the B loan was increased as the latter was oversubscribed. The B loan was priced at just under 200bp, rising to 250bp over the life of the debt, and the A loan priced at 30bp higher than the B loan, with the pricing stepping up at the same rate. Phase II of the project, at a time yet undetermined, was to be implemented and the concessionaire had the obligation of arranging financing for Phase II. The Inter-American Development Bank approved a US $59.5 million A loan for Phase II of the project as well as a B loan of US $43.4 million with ViaQuatro on May 22, 2008. As of December 31, 2009 ViaQuatro was in the pre-operational stage and was expected to become operational in the first half of 2010. The concession term was to expire on November 29, 2038, but could be extended until November 29, 2041 to guarantee 30 years of operation. In March 2010, the construction works on the first phase were concluded. In June 2010, commercial operations commenced. Total investment commitments are based on the historic costs published by the principal lender for the project the IADB in 2008.